PARIS — Six months after Nicolas Sarkozy became France’s first one-term president in three decades, his bruised center-right party is badly split and, much like the Republican Party in the United States, must now decide whether to move to the right or cleave to the center as it tries to recover and set a clear ideological course.

The one advantage for the party, the Union for a Popular Movement, is that the Socialist government is already declining in popularity as it struggles to rein in the budget deficit and avert a recession. But Mr. Sarkozy’s stinging defeat, which was quickly followed by a Socialist victory in legislative elections in June, has left the U.M.P. in an existential crisis that will now play out in a leadership election Nov. 18.

The party faces a choice between two men of very different styles — François Fillon, Mr. Sarkozy’s elegant prime minister, and Jean-François Copé, a firebrand who is acting party leader. The result will likely determine whether it remains the political heir of the party founded by Charles de Gaulle after the Second World War, or moves farther to the right in the face of a challenge from the far-right National Front.

Mr. Fillon, 58, is a traditional conservative who, as prime minister, managed to remain personally popular even as his hyperactive boss sank in opinion polls. Quiet and urbane, a touch dull, he has aimed to steer the party toward the center, hoping to attract voters who narrowly supported Mr. Hollande but are already growing disillusioned with his performance.

Mr. Copé generally shares Mr. Fillon’s views on economic policy and Europe. But the 48-year-old legislator and mayor of Meaux, northeast of Paris, is decidedly more provocative in his rhetoric and unabashed in his efforts to woo voters from the National Front, whose historic strong showing at the polls this year split the conservative vote, sealing Mr. Sarkozy’s fate.

Mr. Copé, short and fiery, describes himself as a “non-practicing Jew” and comes from immigrant stock. Combined with some of his strong stands on immigration and Islam, he is seen as made in the Sarkozy mold. But critics call him “Sarkozy light.”

With Mr. Fillon appearing to be in the lead, Mr. Copé — a driving force behind a 2011 law that banned the public wearing of the burqa , or full veil — has seemed to adopt a more divisive tone, focusing on themes like immigration and religion that have long resonated with the far right.

Last month, in “A Manifesto for an Uninhibited Right,” he said that the suburbs of France’s biggest cities had become bastions of “anti-white racism,” a term much discussed and mocked in the French press. He later used his Twitter account to relay an anecdote about a child who had been robbed of a chocolate pastry by “thugs” allegedly enforcing the Ramadan fast.

The remarks sparked outrage on the left and produced cringing among some U.M.P. members.

“All these little phrases are toxic and dangerous,” said François Baroin, a former Sarkozy finance minister and supporter of Mr. Fillon. Benoist Apparu, a former junior minister, concurred. “Such positions weaken our political family,” he said.

Others disagree.

“He speaks the truth about these things that others are afraid to say,” said Nadine Morano, a former minister close to Mr. Sarkozy who is backing Mr. Copé as party leader. His frankness is especially appealing to “exasperated” young conservatives, she said. “They are very attached to the language of the truth.”

For Marine Le Pen, the leader of National Front, Mr. Copé’s strategy is an admission that party leaders are out of touch. “The U.M.P. rank and file feels much closer to our positions than to those of the U.M.P. leadership,” she said in a radio interview. “Mr. Copé is chasing after his base.”

Turnout at this month’s U.M.P. election — which is open to about 300,000 members — will give some indication of whether, and by how much, the party’s center of gravity has shifted. Even an expected victory for Mr. Fillon, if coupled with a low turnout, could signal support for a more moderate party line but less enthusiasm for him as a potential presidential candidate.

“We will have a sense of the balance of power,” said Bruno Cautrès, a public opinion specialist at the Center for Political Research at the Institut d’Études Politiques, or Sciences Po. “It will determine their electoral strategy — not only for 2017, but for interim elections in 2014.”

After losing the presidency and both houses of the legislature, the U.M.P. is focusing on the more than 300 municipal and communal elections — local government is currently dominated by the left — in just over a year’s time. With Mr. Hollande’s government struggling, analysts suggested that the right could make real gains.

Regardless of who becomes party leader, the U.M.P. will likely continue its delicate tactical dance with far-right voters while avoiding any outright alliance with the National Front. “Marine Le Pen is young; she’s only 43 years old,” Mr. Cautrès said. “The French right will have to deal with her for some time.”

Both Mr. Fillon and Mr. Copé reject any partnership with the National Front, a scenario that is considered politically suicidal.

The U.M.P. is already displaying some nostalgia for Mr. Sarkozy, 57. After a summer spent and on the beaches of Morocco and southern France, he began a series of public appearances that seemed choreographed to keep him in the picture for the presidential race in 2017.

The French press has seemed only happy to oblige him: “Yoo-hoo! I’m back!”’ read a recent cover of Le Point magazine atop a photo of Mr. Sarkozy, tanned and unshaven.

Bruno Le Maire, a former agriculture minister, has quoted Mr. Sarkozy as saying he might feel obligated to run again. “The question is not whether I come back, but if I have the choice, morally speaking, of not coming back,” Mr. Le Maire quoted Mr. Sarkozy as saying.

Analysts said that if Mr. Fillon were to win the U.M.P. leadership vote, he would probably seek to become the party’s presidential nominee. But Mr. Copé has made it plain that he would step aside for Mr. Sarkozy — positioning himself as a proxy for a former president who many believe has no intention of fading away.

“Like any president who has been beaten — especially after only one term, and so narrowly — he dreams of revenge,” said Mr. Cautrès of Sciences Po. “Officially he makes it seem like he has turned the page, that he lives another life. But that is a complete fantasy.”

AFP - European finance ministers focus on how to boost the slumping economy and the bloc's hotly contested budget after their eurozone peers reported progress on solving Greece's bailout problems.

The gathering of all 27 EU ministers comes in the run-up to what is likely to be a fractious November 22-23 European summit on the 2014-20 budget, with many insisting there can be no increase in EU spending when austerity is the order of the day.

They will also be looking ahead to a December 13-14 leaders summit which will try to nail down key elements of Europe's new debt defences, among them a single bank regulator, a major bone of contention between euro- and non-euro states led by Britain.

France and Germany meanwhile differ over the scope of the new regulator, with Paris saying it should oversee all banks while Berlin argues it should only cover the biggest and most important, at least initially.

The finance ministers convene Tuesday with the economy showing every sign of slipping deeper into recession, with Germany, Europe's powerhouse and paymaster, recently displaying signs that it is no longer immune to the ravages of the debt crisis.

The economic slump has been made worse by the grim national austerity measures adopted to tackle the debt crisis, with governments everywhere cutting spending and hiking taxes so as to balance the public finances.

The austerity hardline, championed by Germany along with smaller member states such as Finland and the Netherlands, plays badly in those such as Spain and Greece where unemployment has soared to around 25 percent, while youth jobless rates run at an incredible 50 percent.

On Monday eurozone finance ministers agreed that while Greece had made substantial progress on its debt bailout programme, they would still have to meet again on November 20 to clear the way for a long-delayed aid payment.

Greek Prime Minister Antonis Samaras had said his country would go broke by Friday if Monday's meeting failed to produce the loan payment, but Eurogroup head Jean-Claude Juncker said there would be no problem with Athens rolling over its debt due on that day.

Ministers acknowledged "the considerable efforts" made by Greece and accordingly agreed that revised fiscal targets "would be an appropriate adjustment."

Athens wants its current 240 billion euros bailout accord running to 2014 to be extended to 2016, giving it more time to meet targets which have been torpedoed by a much deeper economic slump than expected.

There is however a cost involved -- a draft report by the troika of the EU, International Monetary Fund and the European Central Bank seen Monday put the total extra funding needed for the two years at nearly 33 billion euros, with the bill rising as the economic outlook darkens.

Tuesday's meeting will also take up the Financial Transaction Tax.

The tax was originally an EU proposal, partly intended to raise new funds and partly to put a cap on the banking sector excesses blamed for the global financial crisis of 2008 which morphed into the debt crisis.

Following broad opposition, the idea was dropped but 11 eurozone states led by France and Germany have returned to the charge, seeking to implement it on their own.

With the backin g of more than a third of the 27 EU member nations, the measure can be implemented under an "enhanced cooperation" procedure but it will still need the blessing of the other EU member states who will not be adopting it.

The German government is increasingly concerned as well as outspoken about France's economic situation and its inability to act. Authorities in Paris are aware of the slump in industry but nonetheless irritated by the German pressure.Dominique Seux

We do not know if the German government discreetly tasked its five expert advisors to examine the situation of France, as the press on the other side of the Rhine has reported. The high-profile economists in the experts’ group have officially denied that any such initiative took place, while the insistence that there will be “No comment” from the Chancellor’s office nonetheless suggests that there is something to the story.

Be that as it may, the simple fact that such a request was not unlikely is a testament to Berlin’s concern about its neighbour. And sadly, it is a concern that is completely justified.

The initial French reflex in response to this state of affairs is one of irritation. That the Germans should assume that they can teach us lessons on how to reform France is both vexing and insolent. Ten years ago, the Federal Republic was the sick man of Europe, it has been consistently late in its management of the eurozone crisis, and no doubt it would be none too happy if it had to take advice from Paris on how to deal – to cite a random example – with its catastrophic demographic situation.

The second French reflex is to remark on the domestic political dimension of such an initiative. In answer to recent criticism of some of her decisions by the five experts, Angela Merkel remarked that you only had to compare the situations of Germany and France to see that German policy was better.

A major historical shift

Although understandable, these impulsive reactions should not be allowed to dissimulate the obvious point which is that Germany is concerned about the state of our economy, about its stagnation over the last three quarters, its deficits, and most importantly, the difficulty inherent in taking action to reverse a downward trend. Germany is right.

One single comparison is enough to highlight what is a terrible situation: according to Eurostat, the latest figure for unemployment in Germany is 5.4% whereas it stands at 10.8% in France. But the real difference is perhaps elsewhere: France, and it seems François Hollande, still consider that the current difficulties are temporary and that everything will improve when the traditional economic cycle is reversed in the latter half of 2013 and 2014.

In contrast, the Germans have long considered that what the French refer to as a “crisis” is in fact a major historical shift, which is why they have allocated themselves the resources they need to deal with it.

The reality is that we do not need the Germans to tell us that the Gallois report [on the competitiveness of French industry] and the government plan which followed it are first steps in the right direction, but only first steps. They are not enough to mark a turning point, and we will have to continue to work to acelerate change.

Even as European finance ministers agreed with the International Monetary Fund on Monday to grant Athens more time to meet its budget reduction targets, a deep rift became apparent. Greece's overall debt load is massive, and the EU and IMF are in conflict over the best method and timeframe for reducing it.

Extraordinary European Union meetings are becoming downright ordinary as the euro crisis grinds into its fourth year. And euro-zone finance ministers on Monday set the date of yet another such gathering. Now, the Euro Group, as the minister club is called, hopes to be able to agree on the next tranche of emergency aid for Greece on Nov. 20.

But between now and then, the EU and the International Monetary Fund (IMF) have to set aside deep differences over the timeline for Greece to reduce its overall debt load from its forecasted 2013 level of 190 percent of gross domestic product to the target level of 120 percent of GDP by 2020. And given the open disagreement on display at Monday evening's press conference featuring Euro Group President Jean-Claude Juncker and IMF head Christine Lagarde, finding a common line might prove to be difficult.

"We clearly have different views," Lagarde said. "What matters at the end of the day is the sustainability of Greek debt so that the country can get back on its feet."

The press conference came on the heels of the Euro Group's announcement that it had agreed, as widely expected, to grant Athens two more years to meet its budgetary target. Instead of achieving a primary surplus (which excludes the cost of servicing debt) of 4.5 percent of GDP by 2014, the country now has until 2016.

The delay means that Athens is likely to need an additional €33 billion in aid from the European Union, on top of the €240 billion the EU has already pledged in recent years to keep Athens from descending into insolvency. But granting Athens two extra years, from the point of view of the euro zone, also means that it will take longer for Greece to reduce its debt load to the 120 percent of GDP mark, a level that has been identified as "sustainable."

'That Wasn't a Joke'

As such, Juncker insisted during the Monday press conference that Greece be given until 2022 to cut its debt, whereupon Lagarde demonstratively rolled her eyes and turned away. When the audience laughed at her antics, Juncker said: "That wasn't a joke." The IMF is firmly insisting on the original date of 2020, a deadline that most observers believe would require another debt haircut -- a move euro-zone finance ministers would like to avoid.

German Finance Minister Wolfgang Schäuble on Tuesday threw his support behind Juncker. Still in Brussels for talks on an EU banking union, Schäuble said that cutting Greek debt to 120 percent of GDP "is likely a bit too ambitious for 2020."

The delay in payment of the next tranche of aid, worth €31.5 billion, and the disagreement between the Euro Group and the IMF has unsettled investors. The euro this week has dipped to a two-month low against the dollar and interest rates on German sovereign bonds have ticked upwards. Athens had said that it would be in danger of insolvency if it didn't receive its next aid payment by this Friday due to €5 billion in debt which comes due at the end of this week. On Tuesday, however, Athens was able to raise some €4 billion by issuing short-term debt.

Few believe that the EU will ultimately withhold the money from Athens. But the Euro Group indicated that it was still checking Greek compliance on some areas of reform. "It clearly needs to be reviewed a little bit, to make sure that all prior actions contained in that budget law are actually taken," Lagarde said in reference to the new budget cuts passed by Greek parliament last week.

Of potentially greater importance, however, is the ongoing disagreement between the Euro Group and the IMF, one which goes deeper than just the timing of debt reduction. The "how" is equally important. The IMF is of the opinion that the only way for Greece to effectively reduce its debt level by 2020 is to default once again on a significant portion of its debt as it did this spring. Such a "haircut," however, would not focus primarily on private investors as it did last time, but on Greece's public creditors. Euro-zone member states, in other words, would lose some of the emergency aid money they have loaned to Greece.

Has Greece Delivered?

That is politically fraught, particularly in Germany where Chancellor Angela Merkel is up for re-election in 2013 and can hardly afford to tell her electorate that billions in taxpayer money must be written off.

European finance ministers hope that, if Greece sticks to its austerity program and no longer falls behind as it did in the last two years, the country's debt will sink to 144 percent of GDP by 2020. Granting the country an extra two years would reduce it further. In addition, Europe is considering other measures, such as cutting the interest Greece must pay on its emergency aid loans and extending the timeframe within which they must be paid back, to reduce the country's overall debt load.

Debt sustainability was also a top concern for German Finance Minister Wolfgang Schäuble on Monday. A report on Athens' progress on the issue had not been finished ahead of the Monday meeting in Brussels. "We first have to see if Greece has delivered," Schäuble said. "I have not seen this."

The World From Berlin: 'Stabilizing Greece is the Least Costly Option'

Euro-zone finance ministers agreed on Monday to give Greece two more years to meet its budget goals, but this was overshadowed by a rift between the ministers and the International Monetary Fund over whether Greece should get a further debt cut. German commentators say the crisis could boil over again.

Here's the good news: The long-awaited report on Greece compiled by inspectors from the European Commission, European Central Bank and International Monetary Fund said the country has made progress on reforms, and euro zone ministers agreed to give Greece two more years to make the spending cuts they have demanded.

And here's the not-so-good news: The troika, as the group of inspectors is called, disagrees on how Greece can bring its debts down to a sustainable level. The row became evident on Monday when euro zone finance ministers said Athens should be given until 2022 to cut its debt to GDP ratio to 120 percent, while IMF chief Christine Lagarde insisted that the existing target of 2020 should remain.

The rift unsettled financial markets, with the euro falling to a two-month low against the dollar. At the heart of the dispute is a disagreement over whether euro zone governments need to write off some of Greece's debt to them. The IMF thinks they should, but Germany is strongly opposed to a write-off because it would entail real losses to taxpayers ahead of the next general election in late 2013.

German media commentators say it's right that Greece has been given more time to get its budget in order, because letting the nation go bankrupt and quit the euro zone could blow the currency union apart. But the new rift in the troika shows the euro crisis is far from over, they add.

Conservative Die Welt writes:

"It's not surprising that the finance ministers interpreted the troika report as showing that the Greeks had made some progress. Even though it looks as though the report has done a lot of sugarcoating, that's how the euro saviors wanted it: positive. That needn't be bad. After all, Europe mustn't base such a fundamental political decision on the judgment of a handful of bureaucrats: Will the euro zone remain intact or not? It will. That has been basically clear since the summer, when the German government finally joined the ranks of those subscribing to the domino effect theory. One can hope that in doing so it didn't let go of the last lever it will need to restructure the monetary union. The row over the best way out of the crisis hasn't been resolved."

Conservative Frankfurter Allgemeine Zeitung writes:

"Even if the Euro Group is at pains to praise Greece's progress, it has failed during the almost endless wait for the troika report to find a solution to the crisis. While the savings, the reforms and the budget of the Greeks are being lauded, no mention is being made of the fact that its government debt is as high as it was before the supposedly liberating debt cut private investors were forced to agree to."

"Athens still can't finance itself without outside help. A major row is raging behind the scenes of the troika over how the growing gap between spending and revenue can be closed. German Finance Minister Wolfgang Schäuble simply wants to change the definition of sustainable debt that has always been the International Monetary Fund's basis for loans. The IMF, on the other hand, is demanding a new debt cut, this time mainly by public sector creditors who by now own virtually all of Greece's debt. Schäuble wants to prevent that because Germany's lower house of parliament, the Bundestag, would have to decide on that, and the taxpayers would see that Greece will need long-term transfers and that its 'rescue' can cost endless sums of money."

Center-left Berlin daily Tagesspiegel writes:

"Greece faces collapse. It is Europe's responsibility to prevent that. That justifies more and longer aid payments."

"The country is only just catching up with the organizational standards of other states in the EU. In the past, Greece hadn't strived for the orderly administration and the good governance taken for granted in European states. It only began doing so under pressure from creditors."

Left-wing Berliner Zeitung writes:

"The Greeks have delivered. They have agreed to the next round of massive cuts and brought the budget for next year through parliament. So the creditors must honor their pledges too. Greece will again receive billions to enable it to survive in the euro zone. This outcome has been evident for weeks because Chancellor Angela Merkel had committed herself to it."

"It isn't charity but sober political calculation that has driven Merkel to make concessions to the beleaguered Southern Europeans. She may be seen as a tough politician in Europe, but she isn't a gambler. She wants to avoid the experiment that a Greek exit from the euro zone would mean. And she has good reason to: If one country falls, could Portugal, Spain or Italy hold themselves upright? So far no one has been able to give her an answer to that question."

"She is right to opt for caution. The path she has chosen isn't easy for her. She will now have to ask the Bundestag to vote for fresh billions in aid. That will trigger tough debates that are likely to expose opposition to Merkel's policy in her own coalition."

"The renewed stabilization of Greece won't solve the problems. But it is the least painful and costly of all the options."

CEOs and bankers are warning that the Spanish region of Catalonia could wreck its economy if it decided to declare independence from Spain. But regional president Artur Mas, who favors secession and wants to hold a referendum on it, is expected to be re-elected in a vote on November 25.

Two weeks before the Spanish region of Catalonia holds an election, business leaders are warning against a secession from Spain, which is favored by the region's president, Artur Mas, the head of the nationalist party, Convergence and Union (CiU).

Opinion polls show Mas might get an absolute majority in the November 25 election. He wants to hold a referendum on independence from Spain, even though the Spanish government has said such a vote would be against the constitution.

Catalans argue that they are unfairly treated by the central government and could better manage their finances on their own. Mas called an early election after his demands for more fiscal autonomy were rejected by the central government in September.

But Catalonia's business elite fears a secession would lead to major losses. Some economists have caluculated that independence could cut the region's GDP by as much as nine percent, even if the new state were allowed to remain in the EU and in the euro zone. But the EU Commission has warned that wouldn't be possible.

The head of Spain's biggest publishing company has already said the company would move its headquarters away from Barcelona if Catalonia seceded. International investment banks like JP Morgan and UBS have said Catalonia would face a "potentially disastrous" future if it leaves Spain.

Spain's King Juan Carlos has expressed fear that independence would not only split up the country, but would also lessen Spain's attractiveness to investors. He recently invited business leaders for talks to assess the level of support for Catalan independence.

According to a recent opinion poll, some 57 of Catalans would vote for independence in a referendum -- but only 40 percent would back it if the move entailed having to leave the EU.

The November 25 election is an extra problem for Spanish Prime Minister Mariano Rajoy who is trying to convince financial markets that Spain can bring its budget and economy under control in the euro crisis.

Independence calls have been fuelled by cuts that Spain's 17 autonomous regions have been forced to make in education and healthcare, the two main areas they have control over.

Following her visit to Greece a few weeks ago, Angela Merkel made her first official visit crisis-plagued Portugal on Monday. With the trip, the German chancellor sought to bring a bit of hope to the struggling nation. But as in other Southern European countries, a weary public greeted her with angry protests.

It didn't take long after her plane landed in Lisbon for it to become clear just how poorly some in Portugal regard Angela Merkel. "Hitler go home," read one banner held up by a man standing on the sidewalk as the German chancellor's motorcade passed by. A few meters further, a person waved a black flag and two others stretched their arms out to give the Hitler salute.

It wouldn't be off the mark to suggest that the location of the day's most important meeting was a well-chosen one. Forte de São Julião da Barra, a fortress with massive walls and moats, located kilometers away from Portugal's capital city on a cliff with a sweeping view of the Atlantic Ocean, is virtually impregnable. It is the country's most important sea fortress and serves today as the headquarters of the Portuguese Defense Ministry. It is to this fortress that Portuguese Prime Minister Pedro Passos Coelho invited the chancellor on Monday for her first official visit to the debt-plagued country at the southwestern edge of Europe.

Passos Coehlo's real office is located in central Lisbon, but Portuguese officials on Monday sought to emphasize the fact that space is cramped at Passos Coelho's office -- hence the decision to move the meeting to the fortress. But one can also assume that the prime minister also took pains not to expose his guest to too much direct aversion from his people.

He preferred on Monday to show how "pleased and happy" he was about the chancellor's visit. "Of course we don't blame our European partners for our situation," he said during a joint press conference after his meeting with Merkel. Passos Coehlo said the problems are attributable solely to the country's lack of competitiveness and instead praised the "constructive aid" Merkel had given. He also noted that the protests taking place surely didn't represent the sentiments of the majority of the people in Portugal.

But even the few, scattered groups the chancellor did encounter during a visit that lasted for only a few hours made clear to Merkel the kind of "hard times" the Portuguese are currently experiencing, she said. With her trip, she wanted to provide "a bit of hope," she said, praising the "courageous reforms" undertaken by the government in Lisbon and describing the path of fiscal consolidation the country has taken as "absolutely necessary." Passos Coelho concurred profusely, saying he was aware of the difficulties associated with austerity policies but they were the only way to guarantee sustainable economic growth in the future.

Merkel a 'Persona Non Grata'

Many people in the country view the situation differently. "Go To Hell Troika," for example, has been the motto of one Facebook group created by the left-wing opposition, unions and civic groups to protest Merkel's visit. And five days before her visit, more than a hundred intellectuals and artists signed an open letter posted on the Internet declaring Merkel to be a "persona non grata." As in Greece, where protesters also greeted the chancellor during her recent visit, Merkel is being viewed by a growing portion of the population in Portugal as the personification of austerity measures and the leader responsible for the painful cuts that they are being forced to accept in return for aid from their European partners.

In May 2011, the country became the recipient of a bailout package from the European Financial Stability Facility, the temporary euro rescue fund. At the time, the troika -- comprised of the European Commission, the European Central Bank and the International Monetary Fund -- provided Portugal with a €78 billion emergency loan. The conditions for the aid have already been extended by a year and stipulate that Lisbon reduce deficit spending to 4.5 percent of gross domestic product by next year, with the country then adhering to the EU upper ceiling of 3 percent deficit spending by 2014. It also envisions Portugal being able to finance itself independently via the markets again by September 2013.

The Portuguese have long been considered model pupils when it comes to reforms, but many experts have come to believe that the country is still going to have to rely on its creditors for a longer period of time. Recently, they have registered signs of fatigue in Lisbon's reform efforts. That's little wonder given the deep recession that has caused the economy to contract by 3 percent this year and an unemployment rate that is at 16 percent and rising. Among the Portuguese under the age of 24, more than one-third are jobless.

Nevertheless, the center-right government in Portugal still wants to push through additional austerity measures. Next year's budget foresees savings of €5.3 billion, or around 5.5 percent of the country's GDP. They are expected to be raised through drastic tax increases, with the Portuguese media calculating that planned income tax hikes could be the equivalent of a month's wages for many people. Cuts are also planned in unemployment benefits and pensions, while massive savings are also planned in the government's education and healthcare expenditures.

General Strike Planned for Wednesday

But the Portuguese have grown weary of the increasing number of austerity measures being imposed upon them. Their outrage is mounting, shaking the nation's sense of social harmony, Portugal's ambassador in Berlin admitted before Merkel's visit. The opposition Socialist Party (PS) no longer wants to back the planned reforms, accusing the government of blindly bowing to Merkel's "savings mania." Even President Aníbal Cavaco Silva recently distanced himself from the government. Merkel also met with Silva for a short talk on Monday to ask him to support Passos Coelho on his difficult path.

And Passos Coelho left no doubt that he wants to continue on this path. The debates that focus only on the risks of these policies, rather than the opportunites, are "pathological," he said. Merkel, too, has appealed to the critics. "We believe in what we are doing," she said. "We're sticking together." When asked what she thought of the Portuguese in general, the chancellor even made a promise. She said she finds the country to be so beautiful that she definitely plans to take a vacation there at some point when she is no longer chancellor.

Shortly thereafter, the chancellor's entourage left the fortress, although it remained within a safe distance of the larger protests. In the historic Belem district, Merkel und Passos Coelho took part in a German-Portuguese business conference at a cultural center to explore investment opportunities between the two countries. A few protesters were also to be seen there, some of them chanting "Merkel get out!"

The chancellor isn't indifferent to such protests, which often include deeply personal attacks against her. But she bears the antipathy, as she has in Greece, with a mixture of stoicism and understanding. Merkel's hope is that that troika's crisis prescriptions will be the right medicine and put the economy back on track. Then, she calculates, the tone would quickly become more conciliatory again. At least that's the plan.

Until these successes arrive, however, the protests will continue. The opposition and a number of organizations in Portugal have planned a general strike along with Spain, Greece and Italy for Wednesday. And once again, the anger is likely to be directed mainly at Merkel.

"Prevailing recessionary developments in the eurozone impact the German economy via foreign trade and a lack of confidence," said ZEW chief Wolfgang Franz in a statement.

"This is likely to be a burden for economic growth in Germany during the next six months," added Franz.

A separate indicator measuring financial market players' view of the current economic situation in Germany also fell to a reading of plus 5.4 points in November from plus 10.0 points in October.

That was its lowest level since June 2010 when it was in negative territory.

Jennifer McKeown, Senior European Economist at Capital Economics, said the index was "consistent with economic stagnation in Germany" but she expected Europe's powerhouse to contract.

"We think that the economy will slide back into recession next year as the peripheral debt crisis intensifies and business and consumer confidence weaken further," she wrote in a research note.

Another economist, Annalisa Piazza from Newedge Strategy, said: "We don't expect the German economy to collapse anytime soon but weakness is certainly likely to prevail" in the second half of this year.

Germany has generally fared better than the rest of the 17-nation eurozone during the three-year debt crisis, but analysts have warned that it cannot resist the turmoil indefinitely.

While many eurozone countries slipped into recession, Germany notched up growth of 0.5 percent in the first quarter and 0.3 percent in the second quarter.

Provisional data for third-quarter output will be released on Thursday.

But the country's central bank warned last month that the economy would slow sharply towards the end of the year and could even contract.

In October, the German government fractionally upgraded its growth forecast for the current year to 0.8 percent, but slashed its prognosis for next year to just 1.0 percent.

The latest version of the Ifo business confidence survey showed German firms were pessimistic about the outlook for Europe's economic powerhouse, as the index slumped to a two-and-a-half year low.

To compile its survey, the ZEW asks analysts and institutional investors about how they view the current situation in Germany as well as their expectations for the coming months.

It is seen as a volatile indicator and generally less reliable as a guide to future economic trends than the business confidence survey compiled monthly by the Ifo institute.

AFP - Hit by the shocks of hurricane Sandy and recession in much of Europe, the International Energy Agency has reduced its world oil demand forecasts for 2012 and 2013, it said on Tuesday.

In its monthly report on the world oil market, the Paris-based IEA now believes global demand will increase by 670,000 barrels a day in 2012 to 89.6 million bpd. This is 60,000 bpd less than assumed a month ago.

For 2013, the IEA slashed its demand forecast by 100,000 bpd to a rise of 830,000 bpd to reach 90.4 million bpd.

The downward revisions are due mainly to sluggish economies in developed OECD countries and the knock-on effects of Hurricane Sandy which wrought havoc on the US eastern seabord three weeks ago.

Sandy is expected to have slashed US demand by 230,000 barrels per day in October, as people curtailed travel and product deliveries were impeded.

For 2012, US demand will dip by 310,000 bpd to 18.7 million bpd, the same 12-month total forecast for 2013, the IEA said.

The other drag on demand was Europe, where the effects of the eurozone debt crisis have pushed much of the region into recession.

Overall, European demand in the third quarter is 150,00 bpd lower than the previous estimate, the IEA said, "as the already bleak outlook was with hindsight too optimistic."

In Europe, the IEA envisages a 500,000 bpd contraction in demand this year to 13.8 million bpd followed by another contraction of 200,000 bpd in 2013 to 13.6 million bpd.

Demand in powerhouse China, the world's biggest energy consumer, was on the otherhand revised slightly upwards for 2012 to 9.5 million bpd up by 260,000 bpd from the precious forecast. Chinese demand in 2013 will be 9.8 million bpd, a moderate increase.

The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017 and will become a net oil exporter by 2030, the International Energy Agency said Monday.

That increased oil production, combined with new American policies to improve energy efficiency, means that the United States will become “all but self-sufficient” in meeting its energy needs in about two decades — a “dramatic reversal of the trend” in most developed countries, a new report released by the agency says.

“The foundations of the global energy systems are shifting,” Fatih Birol, chief economist at the Paris-based organization, which produces the annual World Energy Outlook, said in an interview before the release. The agency, which advises industrialized nations on energy issues, had previously predicted that Saudi Arabia would be the leading producer until 2035.

The report also predicted that global energy demand would grow between 35 and 46 percent from 2010 to 2035, depending on whether policies that have been proposed are put in place. Most of that growth will come from China, India and the Middle East, where the consuming class is growing rapidly. The consequences are “potentially far-reaching” for global energy markets and trade, the report said.

Dr. Birol noted, for example, that Middle Eastern oil once bound for the United States would probably be rerouted to China. American-mined coal, facing declining demand in its home market, is already heading to Europe and China instead.

There are several components of the sudden shift in the world’s energy supply, but the prime mover is a resurgence of oil and gas production in the United States, particularly the unlocking of new reserves of oil and gas found in shale rock. The widespread adoption of techniques like hydraulic fracturing and horizontal drilling has made those reserves much more accessible, and in the case of natural gas, resulted in a vast glut that has sent prices plunging.

The report predicted that the United States would overtake Russia as the leading producer of natural gas in 2015.

The strong statements and specific predictions by the energy agency lend new weight to trends that have become increasingly apparent in the last year.

“This striking conclusion confirms a lot of recent projections,” said Michael A. Levi, senior fellow for energy and environment at the Council on Foreign Relations.

Formed in 1974 after the oil crisis by a group of oil-importing nations, including the United States, the International Energy Agency monitors and analyzes global energy trends to ensure a safe and sustainable supply.

Mr. Levi said that the agency’s report was generally “good news” for the United States because it highlighted the nation’s new sources of energy. But he cautioned that being self-sufficient did not mean that the country would be insulated from seesawing energy prices, since those oil prices are set by global markets.

“You may be somewhat less vulnerable to price shocks and the U.S. may be slightly more protected, but it doesn’t give you the energy independence some people claim,” he said.

Also, he noted, the agency’s projection of United States self-sufficiency assumed that the country would improve gas mileage in cars and energy efficiency in homes and appliances. “It’s supply and demand together that adds up to this striking conclusion,” Mr. Levi said.

Dr. Birol said the agency’s prediction of increasing American self-sufficiency was 55 percent a reflection of more oil production and 45 percent a reflection of improving energy efficiency in the United States, primarily from the Obama administration’s new fuel economy standards for cars. He added that even stronger policies to promote energy efficiency were needed in the United States and many other countries.

The report said that several other factors could also have a large impact on world energy markets over the next few years. These include the recovery of the Iraqi oil industry, which would lead to new supply, and the decision by some countries, notably Germany and Japan, to move away from nuclear energy after the Fukushima disaster.

The new energy sources will help the United States economy, Dr. Birol said, providing continued cheap energy relative to the rest of the world. The energy agency estimates that electricity prices will be about 50 percent cheaper in the United States than in Europe, largely because of a rise in the number of power plants fueled by cheap natural gas, which would help American industries and consumers.

But the message is more sobering for the planet, in terms of climate change. Although natural gas is frequently promoted for being relatively low in carbon emissions compared to oil or coal, the new global energy market could make it harder to prevent dangerous levels of warming.

The United States’ reduced reliance on coal will just mean that coal moves to other places, the report says. And the use of coal, now the dirtiest fuel, continues to rise elsewhere. China’s coal demand will peak around 2020 and then stay steady until 2035, the report predicted, and in 2025, India will overtake the United States as the world’s second-largest coal user.

The report warns that no more than one-third of the proved reserves of fossil fuels should be used by 2050 to limit global warming to 2 degrees Celsius, as many scientists recommend.

Such restraint is unlikely without a binding international treaty by 2017 that requires countries to limit the growth of their emissions, Dr. Birol said. He added that pushing ahead with technologies that could capture and store carbon dioxide was also crucial.

“The report confirms that, given the current policies, we will blow past every safe target for emissions,” Mr. Levi said. “This should put to rest the idea that the boom in natural gas will save us from that.”

This article has been revised to reflect the following correction:

Correction: November 12, 2012

An earlier version of this article misstated the International Energy Agency’s prediction of American self-sufficiency in energy production. The agency said 55 percent of the improvement would come from more oil production and 45 percent from improvements in energy efficiency. It did not say that domestic oil production would rise 55 percent. Also, an earlier version of a photo caption with this article misidentified the equipment shown in use in an oil field in Greensburg, Kan. It is a pump jack, not an oil rig.

PERTH, Australia — Gen. John R. Allen, the top American and NATO commander in Afghanistan, is under investigation for what a senior defense official said early Tuesday was “inappropriate communication” with Jill Kelley, the woman in Tampa, Fla., who was seen as a rival for David H. Petraeus’s attentions by Paula Broadwell, who had an extramarital affair with Mr. Petraeus.

In a statement released to reporters on his plane en route to Australia early Tuesday, Defense Secretary Leon E. Panetta said that the F.B.I. on Sunday had referred “a matter involving” General Allen to the Pentagon.

Mr. Panetta turned the matter over to the Pentagon’s inspector general to conduct an investigation into what a defense official said were 20,000 to 30,000 pages of documents, many of them e-mails between General Allen and Ms. Kelley, who is married and has children.

A senior law enforcement official in Washington said on Tuesday that F.B.I. investigators looking into Ms. Kelley’s complaint about anonymous e-mails she had received examined all of her e-mails as a routine step.

“When you get involved in a cybercase like this, you have to look at everything,” the official said, suggesting that Ms. Kelley may not have considered that possibility when she filed the complaint. “The real question is why someone decided to open this can of worms.”

The official would not describe the content of the e-mails between General Allen and Ms. Kelley or say specifically why F.B.I. officials decided to pass them on to the Defense Department. “Generally, the nature of the e-mails warranted providing them to D.O.D.,” he said.

Under military law, adultery can be a crime.

The defense official on Mr. Panetta’s plane said that General Allen, who is also married, told Pentagon officials he had done nothing wrong. Neither he nor Ms. Kelley could be reached for comment early Tuesday. Mr. Panetta’s statement praised General Allen for his leadership in Afghanistan and said that “he is entitled to due process in this matter.”

But the Pentagon inspector general’s investigation opens up what could be a widening scandal into two of the most prominent generals of their generation: Mr. Petraeus, who was the top commander in Iraq and Afghanistan before he retired from the military and became director of the C.I.A., only to resign on Friday because of the affair, and General Allen, who also served in Iraq and now commands 68,000 American troops in Afghanistan.

Although General Allen will remain the commander in Afghanistan, Mr. Panetta said that he had asked President Obama to delay the general’s nomination to be the commander of American forces in Europe and the Supreme Allied Commander of NATO, two positions he was to move into after what was expected to be easy confirmation by the Senate. Mr. Panetta said in his statement that Mr. Obama agreed with his request.

Gen. Joseph A. Dunford, the assistant commandant of the Marine Corps who was nominated last month by Mr. Obama to succeed General Allen in Afghanistan, will proceed as planned with his confirmation hearing. In his statement, Mr. Panetta urged the Senate to act promptly on his nomination.

The National Security Council spokesman, Tommy Vietor, said in a statement on Tuesday that Mr. Obama also believes that the Senate should swiftly confirm General Dunford.

The defense official said that the e-mails between Ms. Kelley and General Allen spanned the years 2010 to 2012. The official could not explain why there were so many pages of e-mails and did not specify their content. The official said he could not explain how the e-mails between Ms. Kelley and General Allen were related to the e-mails between Mr. Petraeus and Ms. Broadwell and e-mails between Ms. Broadwell and Ms. Kelley.

In what is known so far, Ms. Kelley went to the F.B.I. last summer after she was disturbed by harassing e-mails. The F.B.I. began an investigation and learned that the e-mails were from Ms. Broadwell. In the course of looking into Ms. Broadwell’s e-mails, the F.B.I. discovered e-mails between Ms. Broadwell and Mr. Petraeus that indicated they were having an extramarital affair. Ms. Broadwell, officials say, saw Ms. Kelley as a rival for her affections with Mr. Petraeus.

The defense official said he did not know how General Allen and Ms. Kelley knew each other. General Allen has been in Afghanistan as the top American commander since July 2011, although before that he lived in Tampa as the deputy commander for Central Command, which oversees American military operations in the Middle East.

The defense official said that the Pentagon had received the 20,000 to 30,000 pages of documents from the F.B.I. and was currently reviewing them.

The defense official said that at 5 p.m. Washington time on Sunday Mr. Panetta was informed by the Pentagon’s general counsel that the F.B.I. had the thousands of pages of e-mails between General Allen and Ms. Kelley. Mr. Panetta was at the time on his plane en route from San Francisco to Honolulu, his first stop on a weeklong trip to the Pacific and Asia. Mr. Panetta notified the White House and then the leaders of the Senate and House Armed Services Committees.

General Allen is now in Washington for what was to be his confirmation hearing as commander in Europe. That hearing, the official said, will now be delayed.

After arriving in Perth Mr. Panetta and Secretary of State Hillary Rodham Clinton met with Prime Minister Julia Gillard of Australia for a United States-Australian security and diplomatic conference. Asked by a reporter while pausing for photos with Mrs. Clinton and Ms. Gillard if General Allen could remain an effective commander while under investigation, Mr. Panetta said nothing.

Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, was also in Perth for the defense meetings and had no comment on the investigation of General Allen. “I do know him well and I can’t say,” General Dempsey said of General Allen late on Tuesday after returning from an official dinner with the Australian officials, Mrs. Clinton and Mr. Panetta.

Scott Shane contributed reporting from Washington.

This article has been revised to reflect the following correction:

Correction: November 13, 2012

An earlier version of this article misstated the surname of the general now in Washington for what was to be his confirmation hearing as commander in Europe in one reference. He is General Allen, not General Kelley.

****************

November 12, 2012

Motives Questioned in F.B.I. Inquiry of Petraeus E-Mails

By SCOTT SHANE and CHARLIE SAVAGENYT

WASHINGTON — Is a string of angry e-mails really enough, in an age of boisterous online exchanges, to persuade the F.B.I. to open a cyberstalking investigation?

Sometimes the answer is yes, law enforcement officials and legal experts said Monday — especially if the e-mails in question reflect an inside knowledge of the director of the Central Intelligence Agency.

That was true of the e-mails sent anonymously to Jill Kelley, a friend of the C.I.A. director, David H. Petraeus, which prompted the F.B.I. office in Tampa, Fla., to begin an investigation last June. The inquiry traced the e-mails to Mr. Petraeus’s biographer, Paula Broadwell, exposed their extramarital affair and led Friday to his resignation after 14 months as head of the intelligence agency.

On Monday night, F.B.I. agents went to Ms. Broadwell’s home in Charlotte, N.C., and were seen carrying away what several reporters at the scene said were boxes of documents. A law enforcement official, speaking on condition of anonymity because the case remains open, said Ms. Broadwell had consented to the search.

Some commentators have questioned whether the bureau would ordinarily investigate a citizen complaint about unwanted e-mails, suggesting that there must have been a hidden motive, possibly political, to take action. F.B.I. officials are scheduled to brief the Senate and House intelligence committees on Tuesday about the case.

But law enforcement officials insisted on Monday that the case was handled “on the merits.” The cyber squad at the F.B.I.’s Tampa field office opened an investigation, after consulting with federal prosecutors, based on what appeared to be a legitimate complaint about e-mail harassment.

The complaint was more intriguing, the officials acknowledged, because the author of the e-mails, which criticized Ms. Kelley for supposed flirtatious behavior toward Mr. Petraeus at social events, seemed to have an insider’s knowledge of the C.I.A. director’s activities. One e-mail accused Ms. Kelley of “touching” Mr. Petraeus inappropriately under a dinner table.

“There was a legitimate case to open on the facts, with the support of the prosecutors,” said the official who described the search at Ms. Broadwell’s home. He added, “They asked, does somebody know more about Petraeus than you’d expect?”

Ms. Kelley, a volunteer with wounded veterans and military families, brought her complaint to a rank-and-file agent she knew from a previous encounter with the F.B.I. office, the official also said. That agent, who had previously pursued a friendship with Ms. Kelley and had earlier sent her shirtless photographs of himself, was “just a conduit” for the complaint, he said. He had no training in cybercrime, was not part of the cyber squad handling the case and was never assigned to the investigation.

But the agent, who was not identified, continued to “nose around” about the case, and eventually his superiors “told him to stay the hell away from it, and he was not invited to briefings,” the official said. The Wall Street Journal first reported on Monday night that the agent had been barred from the case.

Later, the agent became convinced — incorrectly, the official said — that the case had stalled. Because of his “worldview,” as the official put it, he suspected a politically motivated cover-up to protect President Obama. The agent alerted Eric Cantor, the House majority leader, who called the F.B.I. director, Robert S. Mueller III, on Oct. 31 to tell him of the agent’s concerns.

The official said the agent’s self-described “whistle-blowing” was “a little embarrassing” but had no effect on the investigation.

David H. Laufman, who served as a federal prosecutor in national security cases from 2003 to 2007, said, “there’s a lot of chatter and noise about cybercrimes,” and most of it does not lead to an investigation. But he added, “It’s plausible to me that if Ms. Kelley indicated that the stalking was related to her friendship with the C.I.A. director, that would have elevated it as a priority for the bureau.”

Orin S. Kerr, a George Washington University law professor who specializes in computer crime issues, said it was “surprising that they would devote the resources” to investigating who was behind a half-dozen harassing e-mails.

“The F.B.I. gets a lot of tips, and investigating any one case requires an agent or a few agents to spend a lot of time,” he said. “They can’t do this for every case, and the issue is, why this one case?”

Still, Mr. Kerr — a trial attorney in the Justice Department’s computer crimes and intellectual property section from 1998 to 2001 — said it was likely that several factors, in addition to the Petraeus connection, made the complaint stand out. Ms. Kelly was fairly prominent in Tampa social circles and had previously had dealings with the F.B.I. agent who took her complaint.

Moreover, he said, the F.B.I. has been putting more resources into investigating cyberstalking crimes in recent years.

A government official clarified on Monday that F.B.I. agents’ first interview with Ms. Broadwell — at which she is said to have admitted having had an affair with Mr. Petraeus, and voluntarily allowed agents to search her computer — took place in September. An earlier account had put that interview during the week of Oct. 21.

Before Ms. Broadwell spoke to the F.B.I. agents, Mr. Petraeus had learned that she had sent offensive e-mails to Ms. Kelley and asked her to stop, another official said. By the time agents interviewed the C.I.A. director during the week of Oct. 28, he was aware of the cyberstalking investigation and readily acknowledged his affair with Ms. Broadwell, the official said.

Mr. Petraeus’s former colleagues in the Obama administration have said little about the circumstances preceding his resignation. But on Monday, Defense Secretary Leon E. Panetta, the director of the C.I.A. before Mr. Petraeus, criticized the F.B.I. for not informing members of the Congressional intelligence committees of its investigation.

“As a former director of the C.I.A., and having worked very closely with the intelligence committees, I believe that there is a responsibility to make sure that the intelligence committees are informed of issues that could affect the security of those intelligence operations,” he said on a flight to Australia.

His remarks were similar to those by the Senate Intelligence Committee’s chairwoman, Senator Dianne Feinstein, Democrat of California, on Sunday.

Mr. Petraeus’s former spokesman, Steve Boylan, told ABC’s “Good Morning America” on Monday that the C.I.A. director was “devastated” over the affair and its consequences.

“He deeply regrets and knows how much pain this causes his family,” he said.

Mr. Boylan, a retired Army colonel, said Holly Petraeus, Mr. Petraeus’s wife of 38 years, “is not exactly pleased right now.”

“Furious would be an understatement.”

Elisabeth Bumiller contributed reporting while flying on the secretary of defense’s plane between Honolulu and Perth, Australia.

**************

November 12, 2012

Top Candidates for State Dept. Are Both Facing Possible Hurdles

By MARK LANDLERNYT

WASHINGTON — For months, the Beltway parlor game about who will succeed Hillary Rodham Clinton as secretary of state has revolved around two names: Susan E. Rice, the American ambassador to the United Nations, and Senator John Kerry of Massachusetts.

But now that President Obama’s re-election has made the exercise real rather than hypothetical, both front-runners for the most coveted job in his cabinet are dogged by issues that could complicate their path to Mrs. Clinton’s State Department office.

Of the two, Ms. Rice, an outspoken, ambitious diplomat with close ties to Mr. Obama, has emerged as the clear favorite. But she would face stiff resistance on Capitol Hill, where she has come under withering criticism from Republicans for asserting that the deadly attack on the American mission in Benghazi, Libya, might have been a spontaneous protest rather than a terrorist attack.

Mr. Kerry, who is the chairman of the Senate Foreign Relations Committee and prepped Mr. Obama for his debates with Mitt Romney, holds a Senate seat that the White House worries could fall into Republican hands if he gave it up for a cabinet post.

Both Ms. Rice and Mr. Kerry have a reservoir of good will in the Oval Office, and if she gets the nod, officials said, Mr. Kerry could be considered for defense secretary. But politics will inevitably play a part in Mr. Obama’s decision, especially in the wake of the sex scandal that brought down David H. Petraeus as director of the Central Intelligence Agency.

The decision, administration officials said, will likely hinge on whether Mr. Obama would rather risk a bruising confirmation battle for Ms. Rice or the loss of Mr. Kerry’s seat, which could be picked up by Scott P. Brown after the loss of his own seat last week.

“The question is, does the president want to launch a major fight with Congress over his choice of secretary of state?” said Aaron David Miller, a longtime diplomat who is vice president of the Woodrow Wilson International Center for Scholars.

The Senate and House have scheduled hearings on Benghazi this week, which will keep the heat on Ms. Rice as the White House begins its deliberations. At least one influential Republican, Senator Lindsey Graham of South Carolina, has already come out against her. “I’m not entertaining promoting anybody that I think was involved with the Benghazi debacle,” Mr. Graham said Sunday on “Face the Nation” on CBS. “Susan Rice needs to be held accountable.”

The White House stoutly defends Ms. Rice, noting that in her remarks on Benghazi, she was reading from a briefing prepared by the intelligence agencies. The administration, citing new evidence, subsequently confirmed that the attack was an act of terrorism.

“Anyone who opposes Susan, based on one day’s comments, will have to reconcile that with what the intelligence said on that day,” said an administration official, speaking on condition of anonymity.

In the unforgiving climate of Washington, though, Mr. Kerry might profit from Ms. Rice’s misfortune. He would likely breeze through a confirmation hearing with his Senate colleagues. And he has been a loyal soldier for the administration on a variety of issues. In 2009, the White House dispatched Mr. Kerry to Afghanistan, where he helped talk President Hamid Karzai into accepting a runoff election. In the Senate, Mr. Kerry has pushed for Obama initiatives like the New Start treaty with Russia.

With his patrician bearing and Massachusetts roots, he was an obvious stand-in for Mr. Romney during debate preparation. While the president’s lackluster first debate almost capsized his campaign, his aides said they did not blame Mr. Kerry.

Nor does the loss of his Senate seat appear quite as problematic as it did before last Tuesday. Senator Brown, who was defeated by Elizabeth Warren, left the door open to another run. But some political analysts in Massachusetts say he might be more inclined to run for governor, given that the state once elected a fiscally conservative, socially moderate Republican — Mr. Romney — to that post. Even if he did run for the Senate, Mr. Brown would face a robust bench of Democrats.

Among the potential candidates for Mr. Kerry’s seat is Gov. Deval Patrick, who is close to Mr. Obama. On Friday, Mr. Patrick and his wife, Diane, flew to Washington for a private dinner with Mr. Obama and his wife, Michelle, at the White House.

Mr. Patrick may have his eye on a cabinet post like attorney general. But there are other formidable Democrats, like Representative Michael E. Capuano and Martha Coakley, who lost to Mr. Brown but has since rehabilitated her image as the state attorney general.

“I think the administration could feel relatively confident that they will hold on to the seat,” said Thomas Whalen, a political historian at Boston University. “When you look back on Brown, it was a special election against an exceptionally weak Democratic opponent.”

Weighing against Mr. Kerry, officials said, is that he would be replaced as chairman of the Foreign Relations Committee by Senator Robert Menendez of New Jersey. With his Cuban roots and hostility toward the Castro regime, Mr. Menendez would likely impede any diplomatic overture by Mr. Obama.

Representatives of Mr. Kerry and Ambassador Rice declined to comment on their prospects, while the White House said it would not comment on personnel deliberations.

Mrs. Clinton has long insisted that she would not serve during a second term, but she recently left open the possibility of staying on the job long enough for a successor to win confirmation. That could allow the White House to delay Ms. Rice’s nomination to allow the passions over Benghazi to subside.

Mr. Kerry and Ms. Rice are not the only names in circulation. Thomas E. Donilon, the national security adviser, is been mentioned, though officials said he would prefer to stay put.

There has even been speculation in foreign-policy circles that the messy departure of Mr. Petraeus might prod Mr. Obama to consider nominating a Republican, like former Senator Chuck Hagel; a hawkish independent, like Senator Joseph I. Lieberman; or even Jon M. Huntsman Jr., who was Mr. Obama’s envoy to Beijing before running for the Republican presidential nomination. Mr. Huntsman dismissed the rumors of his candidacy as “idle hallway gossip.”

For all the political static around Ms. Rice, however, she shares many of Mr. Obama’s instincts on foreign policy. She was among those who lobbied successfully for the United States to intervene during the civil war in Libya. Her ties to Mr. Obama — she advised him during the 2008 campaign — could also enable her to hold her own in an administration where foreign policy has been tightly centralized at the White House.

“You’ve got a guy in the White House who is the most withholding president in memory,” said Mr. Miller, of the Woodrow Wilson Center. “She has the best chance of breaking that withholding pattern.”

***************

November 12, 2012

Labor Leaders Have Obama’s Back, and Are Ready to Help

By STEVEN GREENHOUSENYT

Having helped President Obama win re-election, labor leaders will meet with him on Tuesday and intend to offer their robust support for what they view as his mandate: stand tough against cuts in Medicare, Medicaid and Social Security and keep pushing to raise taxes on the wealthy.

Organized labor’s emphasis on broader policy, rather than union-specific legislation, is somewhat of a change from 2008, when leaders pushed for bills that would make it easier to organize workplaces.

As the administration begins talks with Congressional Republicans to modify a range of tax increases and budget cuts scheduled to go into effect next year, the unions say they will rally their forces on a broader agenda, seeking to counter business and conservative groups that are pushing for cuts in social programs and tax breaks for corporations and wealthy individuals.

“We expect to have the president’s back on the agenda that the voters just declared support for,” said Mary Kay Henry, president of the Service Employees International Union, which spent $75 million in backing Mr. Obama and various Democrats this year. “The president has always said he needs a movement behind his mandate.”

Mr. Obama has talked of going beyond the Beltway to stir up support for his plans, including increasing taxes on households with incomes of more than $250,000. Union leaders have made clear that they are happy to turn out the troops to — in a tactic from the Franklin D. Roosevelt era — “make him do it.” Union members held rallies in 100 communities last Thursday as a first step in promoting the president’s budget plan.

Bill Samuel, the A.F.L.-C.I.O.’s legislative director, said, “We agree with the president that tax rates for the wealthiest 2 percent need to go up to provide revenues to invest in jobs, education, infrastructure and training.”

When Mr. Obama was first elected, labor pushed for the stimulus bill and health care legislation, but also sought a host of more specific bills, such as the so-called card check bill, which are no longer on the top of their agenda. Card check would make it easier to unionize workers by allowing a union to win recognition by persuading a majority of a workplace’s employees to sign cards saying they favor unionization instead of having to go through an often-lengthy campaign and secret ballot election.

Card check was blocked by Republicans in Congress, and with that party controlling the House of Representatives, it seems unlikely to return as an issue this year.

“When you look at how close the election returns were, the president did benefit substantially from organized labor,” said Charles B. Craver, a labor law expert at George Washington University. “The question now is, will he do anything, can he do anything for labor? If he tries, the Republicans will block it.”

After Mr. Obama’s first victory, the International Association of Firefighters pushed Congress to enact a bill that would grant firefighters and police officers the right to bargain collectively in all 50 states. But that effort fizzled.

“We have to shift our strategy until we see the realistic opportunities of a 60-vote majority in the Senate or a change in the rules,” said Harold Schaitberger, the firefighters’ president.

Union leaders say Mr. Obama needs to pursue strategies to reduce income inequality, and some support a bill to raise the minimum wage, currently $7.25 an hour, to $9.80 after two years.

The A.F.L.-C.I.O. and the service employees also back immigration reform, sharing that goal with business groups like the U.S. Chamber of Commerce.

“We think getting 11 million workers out of the shadows and allowing them the same rights as other workers will be real important to improve their lives and incomes,” Ms. Henry said.

Union officials would still love to somehow enact card check, but they are also brainstorming other less ambitious bills that promote unionization, which they say is crucial to expanding the middle class.

Randel K. Johnson, senior vice president for labor issues of the U.S. Chamber of Commerce, said he does not see much chance of Congress passing bills aimed at easing unionization. And he said that union-backed measures to raise the minimum wage or make it easier to unionize would hurt Mr. Obama’s hopes of creating jobs.

Mr. Johnson voiced fears that Mr. Obama would name more pro-union officials to the National Labor Relations Board and might push forward with some languishing proposals, including one that would give preference to companies in winning federal contracts if they pay higher wages and have not violated labor laws.

Chamber officials also fear that organized labor will seek to block a trans-Pacific trade agreement the administration is working on.

Dennis Van Roekel, president of the National Education Association, the nation’s largest union, which worked hard for Mr. Obama, said he was confident the administration would focus less on shaking up public high schools and elementary schools — a move that angered the teachers’ unions — and more on increasing access to early education and making college more affordable.

*************

November 12, 2012

Democrats Like a Romney Idea on Income Tax

By JONATHAN WEISMANNYT

WASHINGTON — With both parties positioning for difficult negotiations to avert a fiscal crisis as Congress returns for its lame-duck session, Democrats are latching on to an idea floated by Mitt Romney to raise taxes on the rich through a hard cap on income tax deductions.

The proposal by Mr. Romney, the Republican presidential nominee, was envisioned to help pay for an across-the-board income tax cut, a move ridiculed by President Obama as window dressing to a “sketchy deal.” But many Democrats now see it as an important element of a potential deficit reduction agreement — and one they can claim to be bipartisan.

The cap — never fully detailed by Mr. Romney — is similar to a longstanding proposal by Mr. Obama to limit income tax deductions to 28 percent, even for affluent households that pay a 35 percent rate. But a firm cap of around $35,000 would hit the affluent even harder than Mr. Obama’s proposal, which has previously gotten nowhere in Congress.

“Let’s just say there’s a renewed interest,” said Senator Kent Conrad, Democrat of North Dakota and chairman of the Senate Budget Committee. “Part of it is people reflecting on Obama’s proposal, but when Romney said what he said, it just added fuel.”

“I was a little surprised Romney proposed a dollar cap when he did it,” Mr. Conrad added.

The attention on the plan is evidence that ideas on deficit reduction are beginning to take firmer form as the January deadline for dealing with expiring tax cuts and automatic spending reductions draws close. The lame-duck session that begins Tuesday could be one of the most pivotal in years, and the political atmosphere is considerably different than when lawmakers left in October for the fall campaigns.

President Obama has been re-elected convincingly. Democrats, once in danger of losing control of the Senate, instead gained at least one seat. House Republicans held control, but as many as 16 incumbents lost, including some of the party’s most uncompromising voices, like Representatives Joe Walsh of Illinois and Allen B. West of Florida, who refuses to concede his seat despite his continuing deficit in the vote count. The somber mood among Republicans could ease negotiations to avert more than $500 billion in automatic spending cuts and tax increases.

“The worst time to work together on a bipartisan basis is right before an election,” said Representative Jeb Hensarling of Texas, chairman of the House Republican Conference. “The best time to work on a bipartisan basis is right after an election.”

Returning lawmakers will find a long to-do list greeting them Tuesday and seven short weeks to do it. In the House, members may once again try to grapple with the farm bill, which expired during the recess. Dairy farmers in particular are clamoring for a resolution, and a year of record drought gave urgency to a bill.

Across the Rotunda, the Senate may once again take up a cybersecurity bill. An earlier measure that would have established optional standards for the computer systems that oversee the country’s critical infrastructure was stopped by a filibuster as some leading Republicans yielded to the concerns of major business interests; members from both parties would like to see a renewed effort on a bill as soon as possible. A military policy bill, which generally passes easily on the floor, was caught up in the fight over looming Pentagon cuts and did not make it to the floor.

But the most pressing task is averting the sudden expiration of all the Bush-era tax cuts, a payroll tax cut and unemployment benefits at the same time that across-the-board military and domestic spending cuts kick in. Most economists believe that “fiscal cliff,” if not mitigated, would send the economy back into recession. Democrats say any plan to avert the crisis must include a combination of tax increases on the rich and spending cuts. Republicans say they are willing to overhaul the tax code to increase federal revenue, but they refuse to raise income tax rates.

That has kicked off a scramble to find ways to raise revenue without higher rates by closing loopholes and tightening deductions and tax credits. Senior Democrats made clear Monday that the search for such tax changes should not be seen as a replacement for higher tax rates on the rich.

Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said the Romney proposal to cap deductions would work only in concert with allowing the top two income tax rates to revert to the level of Bill Clinton’s presidency, 36 percent and 39.6 percent, up from the current 33 percent and 35 percent.

To come close to the level of deficit reduction needed to get the nation’s fiscal house in order, the presidential deficit reduction commission known by the names of its chairmen, Erskine B. Bowles and Alan K. Simpson, assumed those top rates would jump, Mr. Van Hollen said. But beyond those rate increases, more revenue will have to be raised.

The idea gained currency when Martin Feldstein, a prominent Republican economist and former chairman of Ronald Reagan’s Council of Economic Advisers, embraced it during the campaign to show that Mr. Romney’s tax plan was not as far-fetched as Democrats portrayed it. Maya MacGuineas, president of the Committee for a Responsible Federal Budget and something of a ringleader in the search for a bipartisan deficit deal, has also embraced the idea.

But with the presidential campaign over, it is taking on new salience. The Democratic centrist group Third Way has made it the centerpiece of a package of tax changes that it says could raise nearly $1.3 trillion over 10 years without raising rates.

The Third Way proposal would limit tax deductions to $35,000 but would exclude charitable giving. Universities, foundations and other philanthropies have been the biggest impediment to passing Mr. Obama’s more modest 28 percent limit, which did not exclude the charitable tax deduction.

Jennifer Steinhauer contributed reporting.

**************

November 12, 2012

Washington Steps Back From Policing Indian Lands, Even as Crime Rises

By TIMOTHY WILLIAMSNYT

The federal government has cut the size of its police force in Indian country, reduced financing for law enforcement and begun fewer investigations of violent felony crime, even as rates of murder and rape there have increased to more than 20 times the national average, according to data.

The data, much of it contained in recently released Justice Department reports, underscores a reputation for chronic lawlessness on Indian reservations, where unchecked crime has for years perplexed federal agencies, which are largely responsible for public safety on Indian lands.

As one illustration of the profound increase in violence in recent years — despite generally declining crime in much of the rest of the nation — F.B.I. crime data reports that the number of reported rapes on the Navajo reservation in the Southwest in the last several years has eclipsed those in nine of America’s 20 largest cities, even though there are only 180,000 people on the reservation.

The reservation’s 374 reported rapes in 2009, for example, outpaced even the total for Detroit, for decades among the nation’s most violent cities, which had 335 rapes that year.

President Obama has called violence on Indian lands “an affront to our shared humanity.” But according to federal figures, his administration has cut both the budget of the federal Bureau of Indian Affairs and spending on reservation law enforcement. Meanwhile, the Justice Department has opened fewer investigations of violent felonies committed in Indian country than under previous presidents, while pursuing violent crime in the rest of the nation far more aggressively than its predecessors.

From 2000 to 2010, for instance, as crime on some reservations surged by as much as 50 percent, the number of suspects on Indian lands being investigated for violent crime by United States attorneys declined by 3 percent, according to Justice Department figures.

In contrast, while crime fell 13 percent nationally during the same decade, federal prosecutions of violent crime outside Indian country increased by 29 percent.

Further, Indian country had 3,462 full-time police personnel in 2000, a number that now stands at about 3,000, according to Justice Department statistics.

During that time, homicides on Indian lands rose 41 percent to 133 in 2010 from 94 in 2000; rapes increased by nearly 55 percent, to 852 from 550; and arson and robbery rates doubled, according to the F.B.I.

The Justice Department has deployed some 37 extra F.B.I. agents and United States attorneys to Indian country in recent years.

“The attorney general has said this is a priority, and I know he is absolutely committed to the issue,” said Brendan Johnson, the United States attorney for South Dakota, who is also chairman of the agency’s Native American Issues Subcommittee.

Nonetheless, the federal government allocates far less money for public safety on Indian lands than what cities of similar size devote to fighting crime.

The Bureau of Indian Affairs, for instance, which along with the Justice Department is responsible for law enforcement for 1.6 million residents spread over 56 million acres of Indian country, distributed $322 million to tribal law enforcement programs in 2012, according to budget outlays.

But both Philadelphia, which has a population of 1.5 million and a police budget of $552 million, and Phoenix, with 1.4 million people and a $540 million police budget, spend far more on public safety despite having smaller populations and less area to patrol. (Phoenix employs 3,100 officers, while Philadelphia has about 6,400 officers.)

Fort Apache Indian Reservation in Arizona, where the number of officers has declined as violence has intensified, had 36 officers in 2000, but now has just 30 to patrol an area larger than Delaware, according to Justice Department data.

On South Dakota’s Pine Ridge Indian Reservation (population 40,000), 58 tribal officers in 2000 patrolled 3,470 square miles — one officer per 50 square miles. By 2012, despite growth in both population and crime, the number had fallen to 49.

“We pick up a guy for some alcohol-related offense and are out of town for an hour taking them to jail, and in the meantime people are here clubbing and stabbing each other,” said Milton Bianis, a tribal officer.

F.B.I. agents have told officers on Pine Ridge that the reservation needs at least 140 officers to handle an epidemic of violence that includes 3,000 child abuse cases and more than 20,000 arrests each year — nearly one arrest for every other resident.

Lawlessness on reservations, and the inability of the federal government to reduce crime, has worn away trust there.

“I’m not going to have a bit of faith in the system unless you make it safe and the guy who did this to me is going to be behind bars for a very long time,” said Gyasi Ross, a Blackfoot Nation tribal member and lawyer, summarizing widely held views about the dangers of reporting crimes. “I need some assurances because I’m taking my life in my hands.”

Tribal officials acknowledge that crime on reservations may actually be 10 times or more higher than official rates because people seldom report violence. Ivan Posey, a member of the Eastern Shoshone Business Council on the violence-plagued Wind River Reservation in Wyoming, said too few resources — and a lack of federal interest — meant “there’s no deterrent for crime.”

“There is,” Mr. Posey said, “a lack of justice in Indian country.”

Though the federal government has given reservations more authority to prosecute crime in recent years, it has at the same time cut funding for tribal courts.

In Arizona, for instance, the Gila River Indian Community’s courts received no Bureau of Indian Affairs funds from 2008 to 2010, according to records, even though the tribe was inundated with 24,000 new criminal cases (among just 16,700 tribal members).

Tribal courts often lack money to pay per diems for jury duty, and tribes say federal funding barely covers the salaries of court clerks, much less judges. In some places, including Isleta Pueblo in New Mexico, police officers double as prosecutors.

Despite the financing gaps, grants meant to boost public safety on reservations have shrunk, including the Justice Department’s Coordinated Tribal Assistance Solicitation program, which has dropped to $101 million and 200 grants this year, records show, down from $127 million for 301 grants in 2010.

And grants during the past four years from the Justice Department’s Office on Violence Against Women, which has distributed $1.8 billion, have in many cases gone outside Indian lands. Hingham, Mass., for instance, which has a population of 22,157, has received about $1.5 million, and more than $1 million has gone to tiny East Central University in Ada, Okla.

The Emmonak Women’s Shelter, however, which serves Native Alaskans in rural Alaska, has received only $350,000, according to federal figures, and was forced to close this year because it could no longer afford electricity, even after its workers had stopped accepting pay. The shelter recently reopened using emergency federal financing and public donations.

**************

November 12, 2012

F.D.A. Finds Safety Problems at Company Supplying Drugs

By DENISE GRADY and SABRINA TAVERNISENYT

A federal inspection has turned up a long list of unsanitary conditions and unsafe practices at Ameridose, a drug supplier with some of the same owners as the pharmacy whose tainted steroid caused a nationwide outbreak of fungal meningitis that has killed 32 people and sickened more than 400 others.

A 20-page report issued on Monday by the Food and Drug Administration described drug solutions contaminated with germs, rusted and unsanitary equipment, and insects and a bird flying around in areas where sterile products were packaged and stored.

Inspectors also said the company failed to “adequately investigate” complaints of serious reactions in patients that might have indicated problems with drug potency — reactions including fetal distress, a hyperstimulated uterus and maternal hemorrhaging from a drug used in labor, and oversedation and breathing trouble from fentanyl, a powerful narcotic. There were also complaints of low potency in a sedative used to relieve anxiety in children undergoing surgery.

“F.D.A. inspectors observed conditions and practices at Ameridose which demonstrated that the firm could not consistently assure that their injectable products were sterile and safe for use by patients,” Sarah Clark-Lynn, a spokeswoman for the agency, said in an e-mail.

So far, Ms. Clark-Lynn said, no infections have been linked to Ameridose, but all its products have been recalled, and its operations have been suspended since early October at the request of state regulators, who say they need more time to investigate.

Ameridose said in a statement that it had had no instances of product contamination in its six-year history, during which it had shipped “70 million units of product.” However, problems with potency did result in at least one recall. The company said it was “committed to addressing all observations in order to enhance our existing systems.”

Eric S. Kastango, the president of Clinical IQ, a consulting firm that advises compounding pharmacies, said the F.D.A. findings at Ameridose were “just stupefying.”

“It’s an operation that is totally out of control,” he said. “Especially when you look at the patient complaints, that is scary as all get-out.”

Ameridose has been a major supplier of sterile injectable medications to hospitals and sells more than 2,200 blended drug products, including tranquilizers, anesthetics and antibiotics, according to its Web site.

The inspection report dealt another blow to the family behind Ameridose and its sister company, the New England Compounding Center, which made the fungal-tainted steroid medication that caused the meningitis outbreak. The report comes just two days before the House Committee on Energy and Commerce is scheduled to hold a hearing on the outbreak. Barry Cadden, the chief pharmacist at the New England center, was subpoenaed by the committee after he declined its initial request to testify. Federal officials have said Ameridose was investigated because of concerns that it had some of the same business practices as New England Compounding.

Ameridose, founded in 2006, is a private company and is not required to report its financial status publicly. Weeks of no activity seem to have taken their toll on the company, which has laid off or furloughed most of its 650 employees, as well as 140 employees of its sales affiliate, Medical Sales Management.

Ameridose was founded by the same people who owned the New England Compounding Center — Mr. Cadden, who has since lost his license; Gregory Conigliaro, a businessman; and Mr. Conigliaro’s sister-in-law, Carla Conigliaro. It is based in Westborough, Mass.

Robert C. Coleman, a retired F.D.A. investigator, said in an e-mail that while the inspection report was not the worst he had seen, “I would not want to use any of the company’s products.”

Mr. Kastango said part of the problem was that Ameridose, while run by pharmacists, had become a major drug manufacturer, without the proper procedures for safe mass production.

“It’s just unfathomable that they were able to operate for as long as they did,” he said, adding that he doubted Ameridose would ever be able to open for business again.

Humans are slowly losing their cognitive capabilities as adverse genetic mutations fail to be weeded out by evolutionary pressures, according to a bold hypothesis put forward by Dr. Gerald Crabtree of Stanford University.

“I would wager that if an average citizen from Athens of 1000 BC were to appear suddenly among us, he or she would be among the brightest and most intellectually alive of our colleagues and companions, with a good memory, a broad range of ideas, and a clear-sighted view of important issues. Furthermore, I would guess that he or she would be among the most emotionally stable of our friends and colleagues,” the leading geneticist began his article in the scientific journal Trends in Genetics, adding the same could be said of the “inhabitants of Africa, Asia, India, or the Americas.”

Crabtree explained that human intelligence and emotions relied on thousands of genes, which acted together as links in a chain rather than individual components. A mutation to any of one of these genes can produce intellectual or emotional disability — and research has found that most of these genes are particularly susceptible to mutations.

Under the harsh circumstances that ancient humans endured, even a slight reduction in cognitive abilities could doom an individual. Those with lower cognitive abilities were more likely to die before reproducing, leaving only those with more refined cognitive abilities to pass on their genes.

Based on human’s current intellectual and emotional abilities, Crabtree speculates that our ancestors lived in a world “where every individual was exposed to nature’s raw selective mechanisms on a daily basis.”

The peak of human intelligence occurred 50,000 to 500,000 years ago, says Crabtree, when selective pressures were at their greatest.

But as humans moved from small bands of hunter-gathers to dense agriculture-based societies, the “survival of the fittest” thankfully became less and less of an every-day reality. According to Crabtree, this transition had the side-effect of taming natural selection. The lack of evolutionary pressures prevented adverse genetic mutations that slightly reduced human’s cognitive abilities from being eliminated.

Crabtree’s hypothesis does not predict a future chock-full of dimwitted humans, however. Any noticeable decline in human cognition would likely take hundreds, if not thousands, of years. Human society will probably overcompensate for the problem long before then.

“One does not need to… have visions of the world population docilely watching reruns on televisions they can no longer build,” he concluded. “Remarkably, it seems that although our genomes are fragile, our society is robust almost entirely by virtue of education, which allows strengths to be rapidly distributed to all members.”

Speaking after a eurozone finance ministers meeting, Juncker said the country's debt target of 120 percent of gross domestic product should be put back two years to 2022. The current level is an untenable 170 percent.

Lagarde, at the same press conference, said she believed the target should remain at 2020, the original date in Greece's second bailout agreed earlier this year.

"It is critical that the Greek debt be sustainable," Lagarde said, admitting that "we have differences; we are working, trying to resolve them."

Differences on how to get Greece on the path to fiscal stability, ignite economic growth and prevent a rupture of the eurozone have been evident among the "troika" rescue lenders -- the EU, IMF and European Central Bank -- since the crisis began.

The tensions have burst into the open, however, as the troika has worked to finalize a key report on Greece's progress and decide what Athens needs to do to get a new aid release.

If Greece cannot get the 31.2 billion euro ($39.6 billion) disbursement expected, it could be forced to default on its debt.

"This not a new disagreement," said Jacob Kierkegaard of the Peterson Institute in Washington.

"It has been brewing for quite a while, and quite clearly it is at the heart of why the troika report has taken so long to be published."

The IMF, which has already committed to Greece its largest loan ever -- 28 billion euros or $35.5 billion -- has officially shown no willingness to move Athens' debt ratio target.

The target was a key benchmark set for the IMF's participation in Greece's rescue, a level "sustainable" and acceptable to the fund's 188 member states.

The global emergency lender feels that the Europeans must take it upon themselves, one way or another, to reduce the debt service burden on Athens.

Paulo Nogueira Batista, who represents Brazil and 10 other countries on the IMF executive board, which signs off on loans, said the Europeans needed to give Athens breathing room.

"I believe that some form of additional relief or support from the official sector of the euro area is probably needed," Nogueira told AFP.

"This may be additional finance; this might be some relief," he said, stressing he was not speaking on behalf of the Fund.

Arvind Virmani, until this month India's executive director, said last week that Greece's debt cannot be made sustainable "without a drastic debt write-off ... no matter what policy reforms the Greek government undertakes."

Options could include writing off the face value of the debt, cutting the interest rate on the bonds, or the Greek government buying back its own debt at reduced prices.

Whatever the case, the pressure is mounting, specifically on European institutions, to take the hit.

Private sector creditors already took a massive write-off of their holdings of Greek debt in the deal struck early this year.

Nogueira said the IMF, which holds preferred status among lenders, should not be the one to do so.

"What I don't accept is the idea that the preferred IMF status could be challenged. That would be highly problematic, deeply problematic, because this status implies that any additional debt relief, debt restructuring, would have to involve other creditors than the IMF."

"The Fund has already lent an enormous amount of money to Greece. It has overextended itself in financing Greece. So I will not support any call for additional resources from the IMF to Greece," he said.

Kierkegaard said the euro area does not want to give Greece any debt relief until the country's reform program has progressed further.

"They fear that would loose leverage over Athens if they do so," he said.

With the troika at odds, Greek Finance Minister Yannis Stournaras warned Tuesday that the country faces a "very high" risk of default, which could rock the foundations of the eurozone.

"Bankrupt, insolvency. We have to be very careful. I understand (our partners) press Greece to take some prior actions (agreed in return for help), but now the risk of an accident is very high," he told the European Parliament.

AFP - Protesters bristling over austerity cuts launch a Europe-wide string of rallies and strikes Wednesday, pouring into streets, refusing to work and grounding more than 700 flights.

General strikes in Spain and Portugal will spearhead the day of action called by European unions and joined by activists as anger over governments' tight-fisted policies boils over.

For Spain, the eurozone's fourth-largest economy where one in four workers is unemployed in a deep recession, it is the second general strike in eight months in protest against draconian budget cuts.

Spain's main CCOO and UGT unions have urged people to rally under slogans such as "They are taking away our future!", deploying pickets during the night at airports, bus and railway stations.

Activists alerted social networks of an evening rally outside the parliament in Madrid.

The action comes as Spain's right-leaning government and Socialist opposition discuss how to combat a surge in home-owner evictions, blamed for two suicides in just 15 days.

Neighbouring Portugal, where protesters booed visiting German Chancellor Angela Merkel on Monday when she came to support Lisbon's austerity policies, will also hold a general strike.

Protests are being called in some 40 towns and cities across the bailed-out nation, including Lisbon and Porto.

The impact of strike may be undermined by legislation requiring a minimum service in both Spain and Portugal, but airlines have nevertheless warned of a large number of cancellations.

Iberia, Iberia Express, Air Nostrum, Vueling, Air Europa and easyJet cut more than 600 flights including some 250 international routes. Ryanair said no flights had been scrapped yet.

Portugal's TAP said it was grounding more than 160 flights, most of them international.

Greece is the epicentre of the eurozone's debt crisis but its unions are focused on the national crisis and it has limited its protest to a three-hour work stoppage and a rally in Athens.

Despite passing a hotly contested 13.5-billion-euro package of austerity measures last week, Athens is battling to convince its international rescuers to unlock the next bailout payment to stave off collapse.

The European Trade Union Confederation said it was the first time that it had organised a day of industrial action that included simultaneous strikes in four countries.

"By sowing austerity, we are reaping recession, rising poverty and social anxiety," the union confederation's general secretary Bernadette Segol said in an online statement.

"In some countries, people's exasperation is reaching a peak. We need urgent solutions to get the economy back on track, not stifle it with austerity. Europe's leaders are wrong not to listen to the anger of the people who are taking to the streets."

Short of taking full strike action, unions and activists in other European countries say they, too, plan to support the "Day of Action and Solidarity" against austerity and in favour of jobs.

Union-led rallies are being called across France, Belgium and in Poland, where workers decry "social and wage-dumping" in their country.

High-speed Thalys rail services between Belgium and Germany have also been cancelled for the day.

In Germany, viewed by many in southern Europe as the paymaster behind the austerity drive, the union federation DGB has called protests across the country including in Berlin and Frankfurt.

"For now it is mostly people in southern Europe suffering from a crisis they are not responsible for. But the consequences will surely be felt in the rest of Europe," it said.

MADRID — For the first time since the start of the euro crisis, labor unrest took on a European dimension on Wednesday as Spanish and Portuguese workers coordinated a general strike while unions in Greece and Italy also planned protests and work stoppages.

Spain’s heavy industry and large parts of the transportation network were disrupted early on Wednesday by the second general strike since the Popular Party of Prime Minister Mariano Rajoy came to power last December.

The Spanish strike was called by unions after Mr. Rajoy presented a tough austerity budget for next year but it also comes after the country’s jobless rate recently reached a record 25 percent. Portugal faces a similar situation of soaring unemployment and budget cuts to comply with the terms of a $100 billion bailout agreement reached last year with international creditors.

Early on Wednesday, Spanish police reported that 32 people had been arrested and 15 injured – including five policemen — during violence on picket lines across the country but the government said the strike had so far not led to major disturbances. Many shops, banks and retailers were open for business.

While about 700 flights in and out of Spain were canceled Wednesday, Madrid and other airports were still functioning. The strike coincided with growing uncertainty about the future of Iberia, the national airline, after management announced this month that the airline needed to lay off a quarter of its workers to survive.

Ignacio Fernández Toxo, the head of one of Spain’s two main unions, Comisiones Obreras, said that the coordinated strike action across the Iberian Peninsula, as well as work stoppages in other parts of Europe, amounted to “a historic moment in the European Union movement.”

However, support for trade unions has dwindled in recent years because of their failure to prevent the surge in unemployment and controversy surrounding the unions’ reliance on government subsidies rather than contributions from members. In Spain, only about 16 percent of workers are unionized.

In fact, the strike could be overshadowed by protests in Madrid and other cities scheduled for late afternoon.

“I can afford to protest but not to lose a day of pay,” said Carlos Sánchez, a mechanic at Disancar, a small Madrid garage. “Striking at this stage in the crisis brings absolutely nothing to the workers.”

Still, the strike severely disrupted production across the Spanish automotive sector, with workers staying away from factories owned by Nissan, Volkswagen and other carmakers.

In Italy, civil servants went on strike and national transportation workers – although not airlines — called for a four-hour halt on Wednesday afternoon. Students demonstrated throughout the country, with rallies in Turin and Rome.

In Greece, the scene of the most violent social unrest in Europe since the start of the debt crisis, unions called a three-hour work stoppage starting at noon.

Union workers elsewhere also staged a number of protests and stoppages as a show of solidarity with their southern European counterparts.

A walkout by Belgian rail workers severely disrupted services on the country's Thalys high-speed rail line and halted all its connections to Germany, the rail company said Wednesday.

More than 130 demonstrations were planned across France, with two of the country's biggest unions — the Confédération Générale du Travail, or CGT, and the Confédération Française Democratique du Travail, or CFDT — organizing a joint march through the streets of Paris, the first such protests since President François Hollande took office in May.

In a joint statement, five leading French unions expressed their "strong opposition to these austerity measures that are plunging Europe into economic stagnation and recession" and "threaten the European social model."

Spanish unions disagreed with the government and employers over the impact of the strike Wednesday morning. While Mr. Toxo and other union leaders called the strike a success, Juan Rosell, the chairman of the main employers’ organization said that the walkouts appeared to be “not very important” and most likely less disruptive of the last general strike in March, based on electricity data and other early indicators. Red Eléctrica, operator of the national electricity grid, said that consumption was down 18.6 percent at 8 a.m. compared to a normal working day.

Nonetheless, Mr. Rosell called the decision to strike “a torpedo against recovery.”

Indeed, it comes as Mr. Rajoy is struggling to convince investors that Madrid will not require further European rescue funding and will meet budget deficit targets agreed with its European counterparts, in spite of a deepening recession.

In Valencia, a group of strikers tried to block access to the main office of Bankia, a giant lender that the government was forced to nationalize last May because of bad loans, triggering a crisis that forced Madrid to request more than $100 billion in European bailout funds a month later. More recently, banks provoked a public outcry over the evictions of families unable to meet mortgage payments.